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Victory!

* Anatole Kaletsky: Associate Editor of The Times* Professor Norman Stone: Professor of International Relations and Director of the Russian Centre at Bilkent University, Ankara.* Alexei Pushkov: Anchor of the most popular Russian TV programme “Post Scriptum” which has considerable influence on Russian public perception of international events.

Speakers against the motion:

* Edward Lucas: Central and Eastern Europe correspondent for the The Economist and author of The New Cold War: How the Kremlin Menaces Both Russia and the West (2008).

INTERESTING, but for the wrong reasons. That is a crude characterisation of Lithuania’s dispiriting politics ever since the country regained its independence in 1991. In 2004 President Rolandas Paksas was impeached amid speculation over his ties to organised crime. In 2006 a senior politician, Viktor Uspaskich, claimed asylum in Russia after details of his party’s unorthodox finances were leaked to the authorities. Barely less scandalous has been a 15-year delay over issues such as building a new nuclear power station or hooking up Lithuania’s electricity grid to neighbours.

Luckily the politicians’ failings have been offset by a small caste of impressive officials who have anchored the country in the European Union and NATO. Now one is to be president: Dalia Grybauskaite, who easily won the election on May 17th, is a former diplomat and finance minister. For the past five years she has been the EU’s budget commissioner.

This has proved to be a good base for a political career. Lithuanians, shorn of their middle class under Soviet occupation, are impressed by experience abroad. The outgoing president, Valdas Adamkus, spent most of his life in America before returning “home” to serve two terms as head of state. In Brussels the hardworking and incisive Ms Grybauskaite has been a success. She has also used her position to make pointed criticisms of the Lithuanian government.

Nobody doubts her brains or grit. Yet she remains something of a mystery. Her election platform promised transparency and rigour, but gave few details of her views (she barely campaigned, and faced no serious challenger). Apart from her black belt in karate, her hobbies and tastes are unknown. Her zealously guarded private life (she is unmarried and childless) has prompted prurient media speculation. In Soviet days she taught agricultural economics in the Communist Party’s in-house training college. In 1991 she was talent-spotted by an American programme for high-fliers in eastern Europe. But she does not seem to share the fervent Atlanticism usual among Lithuanian politicians.

Ms Grybauskaite’s main formal role as president lies in foreign policy. But on domestic policy, she should work well with the centre-right coalition government that took office last year. She backs its austerity programme, which includes a 15% pay cut for all state employees—including her. She wants faster reforms, for example in energy, plus the sacking of incompetent ministers. Yet as Lithuania’s leaders grapple with its current 12% fall in GDP, their big task is to explain the situation to a weary and cynical public. Finding the charm and sympathy to relate to ordinary folk may test the steely new president.

YOUTUBE may not be the most scholarly repository of material about energy security and Russian foreign policy, but it is certainly the most entertaining. This, for example, shows a Russian military choir saying that if Ukraine joins NATO “we’ll cut off the gas”. (And not just Ukraine: it also threatens to use the same means to punish Europe for its alliance with America.) The audience—shown during the broadcast on REN-TV, Russia’s fourth channel—loved it. Others don’t. Your columnist showed it to a senior Ukrainian politician. He flinched. “I hate them”, was his unvarnished response.

Comedy and politics are a combustible mix. Rein Lang, Estonia’s justice minister, was quite unfairly tarred as a Nazi in the Russian media when he hired an actor to perform a one-man satirical play about Hitler at his birthday party.

Berliners are laughing uproariously at Mel Brooks’s play “The Producers” (pictured), which has finally opened in a German-language production in Berlin. It satirises New York theatre-land, telling the story of two producers who want to stage a failure for tax reasons; they put on the grotesque “Springtime for Hitler”, only to find it becomes a raging success.

AP

A bit of angst about enjoying an evening of jolly musical comedy that uses themes from the most dreadful period in their country’s history would be understandable for the German audience. So the director has cast the only outright Nazi, a brown-shirted nostalgic sentimentalist, as a thickly-accented Bavarian wearing Lederhosen. So that’s all right. Presumably when the show transfers to Munich, the villain will be an Austrian, and in Vienna it will be a Prussian.

Given that, it would be wrong to be po-faced about Russian comedy programmes that display taste which some may find questionable. The show on REN-TV clearly had some ironic overtones. It could be seen as poking fun at the Kremlin’s supposed tendency to solve all foreign-policy problems by reaching for the gas tap. But the politicians in south-eastern Europe who have been signing up to the Kremlin-backed South Stream gas pipeline should perhaps watch and reflect on it a little before they ink their signatures.

The sight of a Russian audience laughing appreciatively at the sight of soldiers turning off a large gas valve in time to a mocking song about neighbouring countries also puts lines in the Gazprom propaganda film such as this in a different light. “You’ll never ever have a surer friend than Gazprom”, intones the singer. Inside Russia, at least.

It is worth noting that Russian officialdom is not known for its sense of humour. The best TV show in Russian recent history, of course, is no longer on air: Kukly (Puppets), with its sometimes brilliant caricatures of 1990s Russia, was an early victim of the Putin clampdown. Swedes found this skit tremendously funny, partly for the faux-mafia encounter at the beginning (which mocks Swedish naivety in dealing with Russian gangsters) but also for the glorious pastiche of Russian visual and musical clichés in the second half. It is not Russia’s Eurovision entry, but it almost could have been. The Russian embassy in Stockholm was not amused, denouncing the broadcast and claiming that the people involved must be mentally ill.

English humour is an even bigger minefield. Our best-loved musical comedians, Michael Flanders and Donald Swann, once sang a song in favour of “patriotic prejudice”. They maintained that the Scots were stingy, the Welsh were “more like monkey than man” and that the Italians eat garlic in bed. It concluded “The English are moral, the English are good/ and clever and modest and misunderstood.” Who could possibly miss the joke in that?

The region as a whole may have avoided economic meltdown, but several countries still face a painful slump

THANKS to a mix of luck and good decisions, the economic apocalypse that loomed over central and eastern Europe seems to have been averted. But dizzy current-account deficits, wild foreign-currency borrowing and reckless fiscal policy are leaving a horrible hangover for some. The IMF forecasts a 4.9% average fall in GDP, with far bigger falls for some. The European Bank for Reconstruction and Development (EBRD) reckons on a 5.2% drop. The downturn is certainly nasty; but some changes have staved off the worst.

One change is that outsiders now assess risk more calmly and rationally. All the former planned economies remain capital-thirsty. But otherwise they are all different. Indeed, a rare common factor among 20-odd countries in the region with the “ex-communist” tag is that they dispute its relevance. Tarring all with the mistakes of overheated Latvia, chaotic Ukraine or debt-sodden Hungary makes no sense. Nor does lumping together rich and poor countries, or those in the European Union and those outside. Exchange-rate regimes vary: two countries are in the euro; five countries have pegged their currencies to it; others float.

So far at least, speculators who counted on contagion toppling countries like dominoes have little to show for it, while those who bet the other way have juicy gains. Poland’s stockmarket is up by nearly 40% since its low in February, Hungary’s has risen by half and Russia’s by nearly 90%.

Outside help is also now better co-ordinated. The previously standoffish IMF co-operates with the European Commission, national governments and the banks. Once seen as a lender of last resort, it now acts pre-emptively. In May it gave a $21 billion credit line to Poland, the biggest and strongest economy in the region. That is quite different, officials stress, from the emergency rescues of Belarus, Latvia, Hungary, Romania, Serbia and Ukraine.

The IMF is also behaving more gently. Ukraine was originally told to balance its budget this year. Now the IMF says a deficit of 4% of GDP is realistic; this month it released its latest $2.8 billion tranche. Officials are uneasy about insisting on fiscal tightening that may aggravate recession. Latvia is likely to be allowed to run a 7% deficit for this year—in return for promising, really and truly, to reach 4% in 2010.

A third change is that more aid has been given to western banks that face souring loans, typically to clients in Hungary and the Baltic states who borrowed in euros or Swiss francs. As outsiders cut back, a credit squeeze is threatening even healthy borrowers. A joint initiative by the EBRD, the World Bank and the European Investment Bank (which used to lend only to state-backed infrastructure projects) has raised $24.5 billion for banks and other firms across the region. The EBRD is putting €432m ($590m) into UniCredit, an Italian bank heavily exposed in eastern Europe. It is thinking of investing in 12 other west European banks. Countries such as Sweden have national schemes too.

In a new report, the IMF argues that European banks still need a lot more help. But the cash and guarantees given already have eased the greatest threat to the region: that western banks might pull out or sink under the weight of their eastern loan books. Meanwhile central Europe, home of many big car factories, has gained from rich-country governments’ efforts to help their car industries. Neil Shearing of Capital Economics, a consultancy, reckons that German and other scrapping schemes to boost car sales will add fully 1% to GDP in Slovakia, and 0.5% in the Czech Republic and Hungary.

The biggest worry now is the Baltic three, which are seeing the sharpest falls in GDP. Estonia’s first-quarter figures showed a year-on-year decline of 15.6%. The fall in Latvia was a stunning 18% and in Lithuania 12.6%. Monetary policy cannot counteract this, since all three are pegged to the euro. And fiscal policy offers no respite. Politicians are pushing through spending cuts, not only to reassure external lenders, but also to meet the Maastricht deficit target of 3% of GDP so as to adopt the euro soon (by 2011, Estonia hopes).

“The crisis is even good if it makes the state more efficient,” says Andrus Ansip, the Estonian prime minister, who is cutting overall public spending by nearly 12%. He has slashed a fifth of the posts in his own chancellery, he says proudly. “Inefficient” spending will be cut; budgets vital for future growth will be preserved, he insists.

Devaluation is still largely taboo in the Baltics. The national currencies are not just economic symbols of solidity, but political ones too. Instead, they hope to regain competitiveness through wage cuts and greater efficiency. Such an “internal devaluation” is possible in theory, but it is unusual (and painful) in practice. It may work: Latvia now has a current-account surplus as its exports rise. Outsiders are awed by the Balts’ determination, though sceptical that the sacrifice will pay off.

Still, while industries such as construction collapse, others, such as alternative energy, are growing. Mr Ansip cites Estonia’s niche in windpower technology. In Latvia a firm called Carbon Neutral Biofuels has raised money for a $10m plant to turn low-grade wood into fuel pellets for Dutch power stations. Adrian Riley, the boss, says the crunch is “a return to reality after a period of acute silliness” when high costs threatened his project’s viability.

The Baltics may be a special case: small, relatively well run, with flexible economies and friendly Nordic neighbours. The broader worry across the region is political. Street protests have been muted so far, and some anger against the smug, corrupt and incompetent politicians who squandered the chances of the past decade is anyway healthy. But the European elections in early June may show how voters are reacting to hard times.

Government crises have not brought big changes. The Czech Republic’s centre-right coalition lost its majority in March amid a row with the headstrong president, Vaclav Klaus. But the result has not been chaos. Until elections in October, a competent-looking caretaker government will run the country, headed by the chief statistician, Jan Fischer. In Hungary a discredited Socialist prime minister, Ferenc Gyurcsany, resigned, nominating an economist, Gordon Bajnai, to run the government until an election next spring. He is pushing through tough spending cuts, with GDP likely to fall 6% this year.

Ivan Krastev, a Bulgarian-based analyst of the region’s politics, says the fear of unemployment will disillusion middle-class voters and stoke protest voting. A bigger problem may be the fear among political elites, some of whom will stick at nothing to stay in power and out of jail. “The model is Berlusconi,” he says glumly.

Friday, May 01, 2009

Vilnius is an example to others—a contested city, but not a divided one

THE choice of name for the capital of present-day Lithuania—Wilno, Vilna, Vilne, Wilda, Vilnia or now Vilnius—shows who you are, or were. In the 20th century alone, it has been occupied or claimed by Germany, Russia, Poland and the Soviet Union, with only brief periods of Lithuanian autonomy.

Vilne, in Yiddish, was home to one of Judaism’s greatest rabbis, a saintly brainbox known as the Gaon (Genius) who gave his first sermon aged seven and kick-started the great Jewish intellectual revival in the 18th century. “Vilna is not simply a city, it is an idea,” said a speaker at a Yiddish conference in 1930. It was the virtual capital of what some call Yiddishland, a borderless realm of east European Jewish life and letters in the inter-war era. At times, the majority of the city’s population was Jewish. Their murder and the deportation of many Poles by Stalin meant that the city lost 90% of its population during the second world war. Present-day inhabitants of Vilnius may find much they did not know in Laimonas Briedis’s subtle and evocative book about their city’s history.

Poles mourn the loss of Wilno, one of their country’s great cultural and literary centres. Poland’s two great poets studied there: Adam Mickiewicz nearly two centuries ago, and in the pre-war years Czeslaw Milosz, a Nobel prizewinner. Yet both men saw their Lithuanian and Polish identities as complementary, not clashing.

For Russians, Vilna had harsher echoes. Fyodor Dostoyevsky stayed there briefly, detesting the subversive pro-Polish sentiment of what was the third-largest city in the tsarist empire. Earlier it was centre stage in Napoleon’s disastrous invasion of 1812. Mr Briedis neatly sums up the city’s appearance in Tolstoy’s “War and Peace”. “A crossing through Vilna was like a passage of honour: to the east…lay Russia—a familiar land offering spiritual comfort and self-respect; to the west—Europe—a foreign territory prompting national self-doubt and embarrassment.”

In any of the dozen possible renderings of the city’s name, its roots evoke mystery. Wilda, its old German label, comes from the word wild. In Lithuanian come hints of the words for devil (velnias), the departed (velionis) and ghost (vele). That ambiguity is fitting. In its 700-odd years of recorded history, the city has been both capital city and provincial backwater. Outsiders have been struck by its filthy streets and shameless women, and also by its glorious architecture and heights of scholarship. Pilgrims flock to the Gates of Dawn, its most holy Catholic shrine. It has been the epitome of tolerance and a crucible of the Holocaust.

In a modern Europe Vilnius can seem peripheral. Mr Briedis, however, begins by noting that when French geographers recently plotted the mid-point between Europe’s cartographical extremes, they found the continent’s true centre was a derelict farmhouse just outside the city.

Foreign visitors have left few written accounts, but Mr Briedis uses them all as sources. A hapless papal delegation provides the first. In 1324 it tried and failed to persuade Lithuania’s great pagan ruler, Gediminas, to adopt Christianity. He showed no desire to forsake Perkunas the thunder god, berating his visitors for their intolerance. “Why do you always talk about Christian love?” he asked the pope’s men. “Where do you find so much misery, injustice, violence, sin and greed, if not among the Christians?”

Lithuania eventually adopted Christianity, along with a dynastic deal with Poland, in 1387. A cathedral was built on the pagan temple, the holy fires doused and the sacred groves felled. The Grand Duchy of Lithuania flourished. At its height in the 16th century it was a vast multiconfessional empire, stretching to the Black Sea, with no fewer than six legal languages, including Hebrew and Armenian. Even as that declined, the Vilnius style of Baroque architecture ripened in glory, a “splendid autumn” in one of Mr Briedis’s many well-turned phrases, that paid “a gracious farewell to its phantom golden age”.

The most poignant chapter is on cemeteries past and present, many of which were desecrated by the Soviets. Mass graves are still unearthed in Vilnius. They hold victims of Stalin’s NKVD, of the Nazis, and—as in one recent example—thousands of fallen soldiers from Napoleon’s shattered Grande Armée. Vanished civilisations and lost empires leave a city stalked by horror and steeped in wonder.

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Regards

Edward

Bene Merito award

Without my foreknowledge, I was last year awarded the Bene Merito medal of the Polish Foreign Ministry. Although enormously honoured by this, I have sadly decided that I cannot accept it as it might give rise to at least the appearance of a conflict of interest in my coverage of Poland.

About me

"The New Cold War", first published in February 2008, is now available in a revised and updated edition with a foreword by Norman Davies. It has been translated into more than 15 foreign languages.
I am married to Cristina Odone and have three children. Johnny (1993, Estonia) Hugo (1995, Vienna) and Isabel (2003, London)